Nikkei 225, Topix Tumble the Most in Six Months as Crude Surges Above $100

By Akiko Ikeda -
Mar 2, 2011

Japan’s benchmark stock indexes fell
the most in six months as escalating tension in the Middle East
drove oil above $100 a barrel, reigniting concern energy costs
will slow the global economic recovery.

Asahi Glass Co. lost 4.3 percent as higher crude prices
sparked concern the glassmaker’s costs will rise. Toyota Motor
Corp., the world’s largest carmaker, retreated 2.9 percent as
speculation mounted turmoil in the Middle East will spread from Libya to Iran. Sharp Corp., a maker of flat-screen panels, led
declines on the Nikkei 225 Stock Average after Morgan Stanley
cut the company’s rating.

The Nikkei tumbled 2.4 percent to 10,492.38 at the 3 p.m.
market close in Tokyo, the first drop in four days. The broader
Topix index fell 2 percent to 944.07, with all of the index’s 33
industry groups retreating. Both gauges had their largest
declines since Aug. 31.

“Investors are looking to avoid risky assets and sentiment
is becoming more negative,” said Naoki Fujiwara, who helps
oversee $6 billion in Tokyo at Shinkin Asset Management Co.
“The military risks in Libya seem to be increasing. If war
breaks out, there will be some impact on oil-related facilities
and the turmoil may spread to neighboring areas.”

The Topix increased 7.2 percent this year through yesterday,
the most among major Asia-Pacific benchmark indexes. Stocks in
the Japanese benchmark are valued at 16.2 times estimated
earnings on average, compared with 13.6 times for the Standard
and Poor’s 500 Index and 11.3 times for the Stoxx Europe 600.

“The environment has been good for the market, but it’s
possible the surge in oil prices could totally change the
situation,” said Kenichi Hirano, general manager and strategist
at Tachibana Securities Co. in Tokyo.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent
today. The index fell 1.6 percent yesterday in New York as
concern over surging oil prices overshadowed a report showing
U.S. manufacturing grew at its fastest pace in almost seven
years last month.

“Uncertainty about the future of the global economy is
resurfacing,” said Hiroichi Nishi, an equities manager in Tokyo
at Securities Inc. “There’s concern inflation will accelerate
in emerging nations and higher costs will hurt profits at
manufacturers.”

Crude oil for April delivery gained as much as $1.01 to
$100.64 a barrel in electronic trading on the New York
Mercantile Exchange, and was at $100 at 2:25 p.m. Sydney time.
Libyan rebels yesterday braced for renewed clashes with forces
loyal to leader Muammar Qaddafi and Al Arabiya television
reported Iranian protesters clashed with security forces in
Tehran.

U.S. Defense Secretary Robert Gates said yesterday two
ships and 400 Marines are en route to the Mediterranean Sea near
Libya to help with humanitarian relief and evacuations.

“Oil prices are likely to be very volatile for the time
being and investors are going to be glued to the situation,”
Nikko Cordial’s Nishi said. “Democratic movements are spreading
and there’s no quick fix to these conflicts.”

Yen Strengthens

Toyota fell 2.9 percent to 3,745 yen and was the heaviest
single drag on the Topix. Nintendo Co., a videogame maker that
gets about 85 percent of its sales outside of Japan, dropped 3.7
percent to 23,290 yen. Sharp plunged 4.8 percent to 846 yen
after Morgan Stanley downgraded the stock to “equalweight”
from “overweight,” citing a failure to cut costs amid a likely
slump in demand for large-screen panels.

The yen appreciated to 81.79 against the dollar today,
compared with 82.20 at the close of stock trading in Tokyo
yesterday. Against the euro, Japan’s currency strengthened to
112.54 from 113.48. A stronger yen reduces income at Japanese
companies when overseas revenue is converted into their home
currency.

Yahoo Japan Corp. was one of only two stocks that rose in
the Nikkei. The stock climbed 3.7 percent to 32,300 yen after
Reuters reported that Yahoo Inc. is in talks to sell its 35
percent stake in the Japanese Internet portal to Softbank Corp.

Showa Shell Sekiyu K.K., an oil refiner, gained 5.7 percent
to 786 yen, the most since June 2009.